CFPB Silent on CU Blanket Exemptions

Members of the Consumer Financial Protection Bureau’s Credit Union Advisory Council told Credit Union Times that CFPB officials listen to credit union concerns and seem to understand the unique relationships between credit unions and their members. However, they said, CFPB officials don’t have an answer for why they can’t simply exempt credit unions altogether from some or all regulations.

John Buckley, president/CEO of the $124 million Gerber FCU of Fremont, Mich., attended the council’s March 12 meeting in Washington. He said while CFPB officials seem to appreciate that credit unions didn’t cause the housing meltdown, they also seem to feel constrained by Dodd-Frank and the law’s congressional mandates, which “doesn’t really allow for common sense implementation.”

The 15 council members have stressed the differences between credit unions and community banks, he said. In particular, they have tried to explain to CFPB officials that the CFPB’s mission to protect financial consumers from shareholders doesn’t really apply to credit unions because credit union shareholders are also the consumers.

“You could justify exempting [credit unions] from any and all regulations proposed by the CFPB because our owners, who are ultimately baring the profit or loss from the cost of operations, are the same consumers the CFPB purports to protect,” Buckley said.

When council members have pressed this point with the CFPB, he said, the bureau officials nod approvingly, but so far the cooperative education hasn’t yet translated into a blanket credit union exemption.

Gregg Stockdale, president/CEO of the $35 million 1st Valley CU of San Bernardino, Calif., also attended the March 12 meeting and said he was encouraged by the CFPB’s good grasp of Dodd-Frank Act mandates.

“I think we moved the needle on their regulations in the favor of credit unions,” Stockdale said. “How far is up for grabs. They still hold to what is stipulated in Dodd-Frank and are careful not to violate any of those mandates.”

Marc Schaefer, president/CEO of the $1.6 billion Truliant FCU, attended the meeting and confirmed the group has asked the CFPB pointblank for a credit union exemption, but hasn’t received a satisfactory answer. Schaefer said the group has further suggested the CFPB expand its exemptions to at least include credit unions that serve low-income or underserved areas.

Credit unions would do themselves a favor developing a litmus test that would help the CFPB feel more comfortable exempting the cooperatives from rules designed to protect consumers, he said.

“I’ve tried in the past in credit union roundtables to define, for example, five things credit unions don’t do that would separate us from predatory lenders,” he said. “Some sort of litmus test that clearly shows your main reason for existence is to serve members and improve their financial lives.”

Yes, there are some credit unions that aren’t as strongly aligned with the credit union philosophy, Schaefer said, and he theorized that perhaps the NCUA could help the CFPB separate out those institutions and determine which credit unions wouldn’t be eligible for the bureau’s exemptions.

Schaefer was complimentary of the CFPB’s organization of the council, calling it “one of the most organized groups I’ve ever been involved with.” Members receive a meeting agenda well in advance, he said, and the CFPB even organizes a pre-meeting meeting to discuss the agenda and what kind of feedback they’re seeking.

“They seemed very concerned about letting car dealers mark up the loan rate during indirect lending,” he said.

The Truliant chief executive was also complimentary of CFPB Director Richard Cordray, who he said arrived at the council meeting immediately after testifying before the Senate Banking Committee regarding his pending confirmation.

“He didn’t get any lunch, he was grabbing a sandwich with the rest of us,” Schaefer said.

Cordray and his senior executives ask a lot of questions of the council and run a very informal and informative meeting, he said.